Gold Hesitates Amid Interest Rate Cut Hopes, Market Warns of Technical Correction
Global gold prices weakened at the start of the week, with the potential for a technical correction still looming after a prolonged rally over the past few weeks.
Fundamentals: Interest Rate Cut Hopes Support Gold Sentiment
US inflation data released last week came in lower than expected, with the annual figure coming in at 3.0%, slightly below the 3.1% forecast. This figure reinforces market confidence that the Fed has room to cut interest rates in the near future.
According to a Reuters report, market participants now assess the chance of an interest rate cut this month at more than 70%, as inflationary pressures ease and economic growth slows.
A Fortune analyst added that, "Resurgent expectations of a Fed rate cut have sparked a flight to gold, with investors seeking safe haven assets amid political uncertainty."
In addition to monetary factors, political tensions in Washington due to the US government shutdown have also boosted interest in safe-haven assets like gold. The government has yet to reach a budget agreement, adding to uncertainty about the direction of the US economy.
"Fiscal uncertainty and looser monetary policy create an ideal combination for gold to hold strong at high levels," wrote Business Insider in its report on Monday (October 27).
Correction Pressure Still Lurks
Although medium-term sentiment remains positive, some analysts warn of a potential technical correction. After hitting a record high above US$4,100 per troy ounce, gold prices are starting to show signs of overbought.
FXStreet notes that gold is now moving within a symmetrical triangle pattern on the four-hour chart, with a range between US$4,040 and US$4,150. If the price fails to break through the upper boundary of the pattern, the potential for a pullback towards US$4,000 and US$3,950 is wide open.
"Gold remains under pressure after its record rally. A small pullback below US$4,012 would be healthy for the market before the next leg up," wrote MarketPulse in its technical analysis today.
Key Level: US$4,000 Becomes Main Defense
Technically, the US$4,000 area now serves as psychological support and an important pivot for traders. Meanwhile, US$4,050–4,100 is a strong resistance area that determines the direction of the continued trend.
If the price breaks above US$4,100, the potential for an increase towards a new record will open. However, if selling pressure increases, the price could correct to the US$3,900 area in the short term.
The RSI indicator also shows overbought conditions, while the MACD is starting to decline—signaling weakening upward momentum.
Future Outlook: Gold Remains Supported by Macro Factors
In the medium term, the outlook for gold remains positive. Expectations of interest rate cuts, a weakening US dollar, and geopolitical concerns provide strong support for the precious metal.
However, analysts warn investors to remain cautious ahead of the Fed's interest rate decision on October 29th. If the Fed sends more cautious signals or delays a cut, gold could potentially experience a deeper correction.
"We see short-term risks to gold, but the medium-term trend remains bullish as long as prices hold above the US$4,000 level," said Edward Moya, a precious metals analyst at OANDA, as quoted by Reuters.
Conclusion
Today, gold is likely to move in a consolidation pattern between US$4,000 and US$4,100, with a positive bias ahead of the Fed's decision. Market participants are advised to pay close attention to new fundamental signals, particularly from comments from central bank officials and political developments in the US.
Source: Newsmaker.id
